North Korea tensions continue to weigh on global stocks

12 August 2017

"Trump's comments about North Korea have created nervousness and the fear is if the President really means what he said: "fire and fury"," said Naeem Aslam, chief market analyst at Think Markets in London.

North Korea threatened a missile strike (http://www.marketwatch.com/story/north-korea-threatens-missile-strike-on-us-base-on-guam-2017-08-08) on a USA military base on Guam, with that saber-rattling coming early Wednesday in that country after President Donald Trump on Tuesday afternoon said he would respond with "fire and fury like the world has never seen (http://www.marketwatch.com/story/trump-today-president-says-north-korea-faces-fire-and-fury-if-it-doesnt-halt-threats-2017-08-08)" if the Asian country doesn't halt its threats. The NASDAQ Composite Index fell 0.21% and closed the day at 6,370.46. Apple is still up 35% for 2017 and hovers near a record high. U.S. Defense Secretary Jim Mattis told Pyongyang it should stop any actions that would lead to the "end of its regime and the destruction of its people".

US DATA: The other potential driver in markets will be upcoming USA economic data, including monthly inflation figures, which could go a long way to determining expectations for the pace at which the Federal Reserve raises interest rates. The Dow fell 0.15% and closed at 22,085.34. Lockheed Martin, Northrop Grumman, Raytheon and L3 Technologies hit record highs for a second straight day. The Dow Jones industrials average gained 14.31 points, or 0.1 percent, to 21,858.32. The Nasdaq composite lost 0.3 percent to 6,352.33. United States stock index futures also fell, with the S&P 500 indicated to open down 0.4 per cent.

Geopolitical concerns continue to weigh on Wall Street amid an ongoing escalation in tensions between the USA and North Korea. Trump warned that the North would be met "with fire and fury". Earlier in the week, Trump said the USA would unleash "fire and fury" on North Korea if it continued to threaten the U.S.

Shortly after this announcement, North Korea said it was "carefully examining" the idea of a missile strike on Guam, a U.S. Pacific territory, Reuters reported citing the North's state-run KCNA.

Still, there were fewer signs of anxiousness in the markets Friday.

The VIX, a measure of how much volatility investors expect in stocks, jumped 10.4 percent. It's still the highest it's been since May. That is the index's lowest level in two months.

THE QUOTE: "Inflation - or lack of -- has been an ongoing problem for the central bank and some policy makers have voiced concerns about this in recent months as they consider whether to raise interest rates again this year", said Craig Erlam, senior market analyst at OANDA.

The Korean story has seen the yen gain around 1.5 percent this week, its biggest rise since mid-May. The Fed, which raised its key interest rate in March and June, has signaled it plans a third rate hike before the end of this year.

US stock futures were pointing to a weaker open on Friday. Lam Research Corp. climbed $4.82, or 3.2 percent, to $154.26. Its shares slid $9.77, or 5.3 percent, to $174.02.